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Placing a 5U bet on…. Ethereum.

NOTE:I’ve updated this blog on 14th June… The more I read up on it, the more complicated it gets. I don’t think Ethereum is a bad investment at all but I wanna explain a few more things, so check out the bottom of the article for more info, if you have read this blog previously.

I’m sure you’ll have heard of Bitcoin. You probably know that Bitcoin is worth a stupid amount of money and you probably wish you knew enough about it to actually have bought some and made a load of money on it. I was going to buy Bitcoin when it was at $900 and didn’t, because I didn’t know how… Well now it’s at $2831.17. That’s annoying.

You’ve probably heard of Ethereum by now too… If not, it’s basically the main rival crypto currency to Bitcoin. I was going to buy Ethereum at $140 (a couple of weeks ago). It’s now around $340-400. That is also annoying. However, it’s slightly less annoying, because I’ve taken the time to learn a bit more about it and actually bought some. By the time I actually got around to it, the price was $310ish. That was 2 days ago.

If you’re on this site, like me, you’re a bettor and a risk taker. You probably spend your weeknight evenings watching fights you don’t really want to watch, looking for small amounts of value over the bookmaker’s odds or contemplating the % chance of a knockout, to see whether a prop bet is worthwile. Generally if all goes well over a few bets, we’re pretty delighted with 30% ROI, for a LOT of work.

The Ethereum I bought 2 days ago is up 10-20%+ already. It might crash and I might lose all that money but what’s the ceiling and what’s the floor? I’m approaching it like this is a bet, not an investment and my bet is that it won’t. My bet actually is that Ethereum will overtake Bitcoin in terms of market share. In terms of an actual price for Ethereum we shall see but if I’m putting units on it, you can assume I think that it will continue to go up in value. Like with any bet, that prediction is based on research and a significant amount of thinking time.

SO, what is Ethereum? Why is is better than Bitcoin? Why will it go up in value? Is it a “bubble”?

Well the short answer is “does it really matter?” Look at what happened to Bitcoin… basically something similar is happening to Ether. You’re a gambler. Stick a few units on it and forget about it. You lose a few units all the time, so what difference does it make? Here’s the link to buy some, go buy some.

The long answer, is complicated but here goes… From a noob, so forgive me if any of this is a bit off, but I’ll try.

Intro to Crypo Currencies

First of all, crypto currencies aren’t reeeeeally currencies. They’re kind of platforms for doing stuff. Ways for one program to talk to another securely, ways to encode data when it’s uploaded to the cloud, ways to pass currency more quickly between banks etc. That’s why there are so many of them. My mate in the pub, when belittling the concept (yet still being interested in buying), said “I’m gunna invent biddlybong coin then… I don’t get it, it’s just made up”. Well, yeah, they’re all made up but they all do something. Basically look at them like they are their own programming language. You don’t need to understand how the programming works, just have a vague understanding of what each of them are programmed to do.

Here’s an analogy… You know what the cloud is. You upload your documents etc to the internet and it’s stored somewhere “safely”. Well, if it’s all stored in one place it can be hacked. If instead of one cloud it was tiny little droplets of water scattered one droplet in each cloud, that’s a lot safer.

Take one example of sending a payment from your bank to another bank in another country. You use a SWIFT and BIC code to send that transaction. There is a cryptocurrency called Ripple which is being developed to supersede that SWIFT/BIC process, which is slow and convoluted.

Ethereum, according to their website, is “a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.”. Basically it encodes data really well and lets you write secure programs that are virtually impossible to hack, making data safer.

There you go… If you wanna know any more about it, read up on it.

Ethereum over Bitcoin

I’ve read enough about Ethereum to know that it’s ahead of Bitcoin in terms of what it can do and also scaleability, so is more futureproof. Bitcoin has scaleability problems and will have to address those problems at some point this year. There is a lot of nasty infighting in the Bitcoin world in terms of how to deal with that scaleability. It will most likely see Bitcoin split into two – Bitcoin and Bitcoin Classic (something that’s already happened to Ethereum), so as I say, Ethereum is ahead of the curve. When that happens it will probably be a bit chaotic in Bitcoin land, presumably with most people jumping over to the new Bitcoin. Let’s assume that means a dip in the value of Bitcoin. Whether that means a loss of faith in the whole Crypto Currency market or a switch in support from Bitcoin to Ethereum (and other Cryptos), is the question.

I’m sure some people think that means the whole thing crashes. Well that would assume the concept of Crypto doesn’t work and it flat out does. I mentioned Ripple earlier. I read an article today talking about how hundreds of banks are looking into using it instead of SWIFT. That’s faith in the system and faith in the concept. It’s a better way of doing things. Think of it like an upgraded operating system or going from paper filing to digital filing.

Specifically on Ethereum, there are interesting articles popping up like Vladimir Putin meeting with the founder of Ethereum (who is also Russian). With state backing, that’s the sort of thing that pushes Ethereum into a long term market leader for me, keeping it ahead of other upcoming Cryptos.

Mining

So last night I told my aforementioned friend to basically shut up and just buy £500 in Ethereum on Coinbase. He said he was going to but messaged me later saying “I’ve read about mining? What’s mining?” I told him to ring me and I’d explain but he was too busy watching Poldark with his missus. Since then, Ethereum has gone up 17%.

Now, if you read about mining, depending on how well the article is written you might get half way through the first couple of paragraphs and think “fuck this, this sounds dodgy”. When I first read about it, it kinda sounded like “miners” were people trying to hack other people’s existing Ethereum accounts and steal their money…. Basically it was a badly written article.

From what I understand it now, the concept of this sort of cloud programmed security system, relies on loads and loads of processing power. The whole point is that the processing / encryption is decentralised, so you need thousands of computers around the world, whirring away, doing the hard work. That’s what the mining computers are… Your tech geek sets up a super-computer in his bedroom to take part in the encoding and as a reward for that, every now and again they get a bit of currency. That’s the “mining” part; the little reward. I kind of looked at it like quantitative easing as a reward for keeping the whole system working. Mining is a dodgy sounding name for what is essentially the computers that run the system.

What’s The Likely Price of Ethereum?

Fuck knows. Sorry, I know that’s the entire point of the article really but I can’t answer that question and I don’t think anyone can really. I think everyone just constantly adjusts their forecast upwards. When it was $140 the guy who tipped me off said “it’s worth at least $220”. Now people are saying “it’s worth at least $600”.

Perhaps it depends what the actual value of Bitcoin should be. Is Bitcoin over-inflated because it’s so hard to buy? Is that pushing everything else up and when Bitcoin becomes more scaleable and accessible will the price come back down and adjust the whole market? Maybe. But as I say, what’s the worst that could happen? You lose 5 units? You wouldn’t even do that because if the market starts to dip you can sell if you want.

For me though, it’s more than that. It’s kinda like if you could have bought shares in the internet. It’s a new way of doing things. I’m sure it will be superseded by something else one day, maybe when there are quantum-computers, but for now, this is a development in digital jiggerypokery and I think 5U in this is better value than 5U on Tim Johnson to beat Daniel Omielanczuk, whichwas a bet I happily placed.

Where to Buy?

Coinbase at the moment is the only simple place I’ve been able to find. There are lots of day-trading exchanges like eToro but I don’t know enough about that. If you want to just buy some and sit on it, use Coinbase. If you click this link, you’ll get $10 free Bitcoin.

Tools I’m Using

P.s.

It’s important to note that the fluctuations on a daily basis are absolutely crazy. You might wanna try and watch the minute by minute fluctuations and buy in a dip or you might want to just take a long term view. Some people are predicting a correction before another upswing. That’s all part of the gamble.

I’m totally getting more than 5U and I’m also researching some of the smaller Cryptos and will be investing in those too. You don’t need me to remind you that this is all at your own risk – this is a betting site and you know that already. Good luck all! 🙂

Update 14th June

OK, so obviously with anything like this, it’s more complicated than you can possibly imagine.

The thing that’s caught me out in terms of the scale and sheer clusterfuckery of it, is the concept of the ICO (Initial Coin Offering). ICOs are share offerings in startup companies, whereby the shares are coins and the company is a crypto currency. The concept is fine but the baffling thing about it, is the sheer volume we’re talking about. There are so many ICOs and the amount of money involved is stupidly high, that it does feel like a farce to me.

The biggest ever ICO happened last week where the new offering (Bancor), generated $140,000,000, basically in crowdfunding. All that is paid for in Ethereum. The people behind Bancor have to put most of that Ethereum back on the market, to actually fund their project. They’ve said they’re going to hold 20% in Ethereum but 80% will be moved on and that’s a massive amount of money, which I’d imagine will stall the market. I would imagine they’re going to be dripping that back into the market pretty slowly to try not to crash the price.

However, the concept of ICOs is what bothers me. They’re too frequent and I think they’re running the risk of making a mockery of the whole crypto currency market. People who don’t really know what they’re doing have made money out of Bitcoin and Ethereum and are just throwing it at these new ICOs trying to make even more money. Loads of them will fail, I’m sure. Also, if the funding is done in Ethereum, that pushes up the price of Ethereum.

Overall, it just feels like a bit of a mess and assessing a rightful value for anything amongst that mess is very difficult. The term bubble gets banded about a lot. It’s a bit of a catch all term for if a market is over-inflated… I don’t think the overall market is over-inflated at all but the spread of value between all the currencies is anyone’s guess really.

I’m still totally happy to have some money in Ethereum. I’m actually going to be looking at the daily fluctuations to see if I can tell what time of day these ICOs are putting their Ether back on the market. If feels like it’s dropping in value in the morning GMT then climbing back up over the course of the day… I’ve started taking screenshots of the daily graphs and will see if that’s the case.

My plan going forward is probably to wait for Ethereum to double up, then take out a % so if it all goes tits up I’ve not really lost out. Then I’ll just keep an eye on the market on a more casual basis. Even if the whole market for cryptos is a bit of a mess, I think Ethereum will continue to go up in price overall but it’s definitely going to be a bit of a judgement call when to sell, because if it gets to $1000 or so, I’m not convinced it will stay there forever.